English Supreme Court Confirms Broad Application of Business Interruption Policies to COVID-19 Losses

The latest ruling by the UK's Supreme Court is a victory for policyholders.

Following the High Court's September 2020 Judgment in the COVID-19 Business Interruption Test Case ("Test Case") brought by the UK Financial Conduct Authority ("FCA"), the UK's Supreme Court ruled on 15 January 2021, that all the insuring clauses reviewed will provide cover for business interruption caused by the COVID-19 pandemic. This is the final word on the meaning of the various business interruption clauses considered. 

While there are ongoing disputes between policyholders and insurers regarding whether COVID-19 causes physical loss or damage (for policies containing such cover), the Test Case was brought to clarify whether there is insurance cover in principle for COVID-19 related losses under a variety of other common business interruption policy wordings concerning the presence of "notifiable disease" and/or denial of access due to Government measures. The policy wordings under review are set out in a previous Jones Day Commentary here.

The practical effect of the Judgment is that all of the insuring clauses considered by the Court will provide cover for the business interruption caused by COVID-19. The decision is a victory for policyholders and provides clarity to policyholders and insurers alike. A copy of the Supreme Court Judgment can be found here

The FCA has already published Draft Guidance for policyholders on how to prove the presence of COVID-19, which is a condition in certain types of policies. The consultation on this Draft Guidance was expected to close on 18 January 2021, but the FCA is extending the closing date to 22 January 2021, for any supplemental comments arising from the Supreme Court Judgment. The FCA will issue finalised Guidance as soon as possible after that.

Next Steps

The Supreme Court Judgment will be refined into a set of Declarations in addition to the FCA publishing a set of Q&As for policyholders to assist them and their advisers in understanding the Test Case. The FCA will also publish a list of Business Interruption policy types that potentially respond to the pandemic based on data that will be provided from insurers. 

Policyholders who have business interruption insurance and suffered losses because of the COVID-19 pandemic should review their policy carefully to determine whether they are eligible to recover under the terms of their policy in light of this Judgment. If any doubt, policyholders should seek legal advice.

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